Drastic changes in the global industry environment, regional politics, trade tension and rapidly evolving technology innovations are making it more and more challenging to do business in recent years. Disruptive iABCD technologies (IoT, artificial intelligence, blockchain, cloud computing, big data analytics) are coming on strong, ready to reshape the business world. Although these new technologies may bring unlimited opportunities, they also cause increasing concerns in security, privacy, regulations and social trust in the industries that make use of them. Businesses today not only have to cope with the competition in products and services but more importantly, they need to build up their abilities to protect sensitive customer data so as to maintain customer trust as they expand into new territories. With these new developments come more challenges and opportunities as well.
According to PwC's Global Digital Operations 2018 Survey, PwC interviewed 1,155 manufacturing executives in 26 countries to develop an index that ranks companies by digital operations maturity, from Digital Novices, Digital Followers, Digital Innovators to Digital Champions. Some of the key findings include:
Only 10% of the companies can claim the distinction of being called Digital Champion. Two thirds of the companies have not started digital transformation or only have undergone moderate digital transformation.
Asia-Pacific is leading the way to digitization. Asian companies have introduced digital products and services at a much faster rate than their counterparts in the other areas. This is the result of the enthusiasm of the region's young, tech-savvy corporate managers to embrace digital technologies, as well as soaring production costs that are forcing Asian companies to digitize key operation processes to maintain competitiveness. Digital Champions create value through integrated Customer Solutions ecosystems. Digital Champions serve customers by integrating Operations, Technology, and People ecosystems to serve customers with competitive, end-to-end solutions.
From these findings, we can see that integration, new technology and ecosystem are undoubtedly the most critical key words to industry competitiveness going forward.
With these key words in mind, what is the next step for Taiwan's digital transformation? The Taiwan manufacturing sector has been coping with many challenges, including trade barriers, rising costs, labor shortage, global competition, supply chain transformation, environmental protection pressure, labor law changes and tax law changes. Almost all business executives find it difficult to maintain operation. Only by continuingly upgrading themselves, refining their management skills and strengthening their competitiveness can they make breakthroughs and thrive in a highly competitive environment.
According to PwC's 22nd CEO Survey: Technology trends report 2019, 50% of tech company leaders were "extremely concerned" about finding the talent and skills they needed. Creative talent is hard to find and that has become tech leaders' top concern. With the whole world aggressively engaging in digital transformation and industry upgrade, what opportunities are there for Taiwan firms and startups?
To answer the question, let's first look at market changes. Before a startup sets up shop, the question to ask is whether they will sell products or services to businesses (B-side) or consumers (C-side). According to PwC China's New Trends of Technology Enabling To-B Services Whitepaper, the market in the Internet era has little room for startups (T) with innovative technologies to grow from C-side. In other words, most of the topics or business models have been explored by other startups. Furthermore, with medium and large corporations taking hold of marketing and channel resources of the consumer market, it will be very risky for startup firms to insist on creating a blue ocean market through a 2C model.
We can foresee the trend that future startups will likely be operating on the mainstream T2B2C model but they will need to search for upstream opportunities. Tech startups should think about how to apply their strength to provide B-side customers better solutions. In the high-tech era, with IoT and smartphones being widespread, the T2B2C model has become popular and has developed in depth across upstream and downstream industries, which has reshaped user experiences of services and products and further created ecosystems combining various platform systems, igniting possibilities in many aspects for the business environment.
What does the T2B2C trend mean to Taiwan startups and firms? Taiwan has fostered a complete supply chain and premium workforce with its focus on ICT industry development over the years. This is certainly Taiwan's biggest advantage. Many international corporations have chosen to set up their R&D or procurement centers in Taiwan, mostly eyeing Taiwan's strong supply chain and engineering talent. This is proof that Taiwan with such unique advantages still appeals to global conglomerates.
Taiwan can build on top of its current advantages. As part of the local industries' urgent efforts to upgrade and transform, medium and large corporations can invest in or acquire startup firms as a way of external innovation management. This approach will allow them to save the costs of having to employ in-house R&D engineers or work with startup firms to jointly develop product technologies and commercial applications to grab preemptive market opportunities. To Taiwan startup firms, they need to leverage their existing strength and technologies to develop 2B solutions based on iABCD technologies. They can first develop products in Taiwan, including all steps of the processes from idea, design, product research, testing and small-scale pilot run. Then, the products can be launched into other regional markets or the global market. Furthermore, with medium and large corporations encountering an innovation bottleneck for 2B or 2C model, startup firms boasting their creative power stand a good chance of discovering additional opportunities.
Amid the time when all industries are actively pursuing digital innovations, the T2B2C model is exactly what Taiwan startups need to transcend national boundaries and compete on the world stage. What their development strategies are and how they can collaborate with large enterprises are the challenges to startups' strategic planning ability and vision.
(Shih-Jun Huang is managing CPA for startup services, PwC Taiwan)